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Can Rural Entrepreneurship give a Face-Lift to Developing India?
By Anamika Sahu, SiliconIndia
Bangalore: At the beginning of 20th century Mahatma Gandhi said, "The soul of India lives in its villages," we are in the next century now still the statement stands very true. A decade back, the focus was just on the urban areas by the national and multinational companies. Only a few of them who knew the depth of rural market has strong presence from the beginning.
While in recent years, various key components of Indian economy have become world leaders in innovation and growth, other parts of the Indian economy, especially in rural areas, have not experienced similar advances. However, opportunity exists to build new linkages and advance the means by which agri-food production and marketing systems function and serve the larger economy. More than 70 percent of the households in India live in the rural India and in the near future, it is estimated to grow, which makes it the biggest potential market in the entire world. With increasing income levels, the market potential is going to expand in near future. The penetration of the existing MNCs and entry of the new one's into the rural area pictures the depth of this market in the coming future.
Various factors are responsible for the rolling of this ball upside down. Rural India is becoming educated changing the methodologies of the market to reach them. People have become more value conscious than price. Many companies, finding potential in such markets, have changed their production and marketing strategies. Word of mouth is still the best way to get a smooth entry into these areas. Initially it was agriculture, which was considered to be taken care of to improve the standard of living of the rural people, but gradually need is felt to look upon other factors.
"There exists a huge vacuum of demand and supply, which needs to be bridged by the government and the big and small size entrepreneurs by understanding the need of these people and area and customizing the products according to their requirement. We cannot serve them with the available products as it has not been manufactured accordingly," says V. Vijay Babu, CEO, Vertox, a low cost ATM manufacturer.
Encouraged for diverse reasons, few foresee rural entrepreneurship as a soaring potential of providing employment, farmer finds it as a medium to improve farm earnings and women find it as an engagement possibly near their home providing independence and reduced need for social support. Rural entrepreneurship is considered as a vehicle, which can carry these people with diverse ideas to reach their dream. Babu adds, "The existence of such environment largely depends on the effectiveness of various policies promoting rural entrepreneurship and support from the government."
The core of the problems in countries like India is surplus agricultural labor and closure of traditional village industries, resulting in unemployment in rural areas and migration of rural youth to the urban areas in search of jobs, thus putting more pressure on the urban infrastructure and amenities. Recent change in the shift of big entrepreneurs from the urban to rural areas has become a frequent picture. Availability of key raw materials, cheaper labor costs and presence across the entire value chain gives India a competitive advantage. But the question still stays, will influencing entrepreneurship help curtail migration from rural to urban area? Will it play a part of it to resolve unemployment?
Rural economy constitutes 50 percent of GDP. Understanding the characteristics that make the people and the market in rural India unique can help corporations to enter this market with success. A swing in policy orientation is needed and a re-assessment of resource management is required to attain sustainable growth pattern. "We cannot bank upon an inherently brittle international economic system for a very long period of time and definitely not with a great level of surety. It appears to be in the interest of the national economy to pay inward attention and strengthen its traditional base which can provide it with an exclusive support structure for both long term social and economic growth" says Ramakrishna, Co-Founder and CEO, Rang De, NGO for Micro Finance.
According to the NSSO data (2006-7), there are 16.5 million service sector enterprises in India, which employ about 33.5 million workers. Out of the 16.5 million service sector enterprises, 85 percent are own account enterprises (OAEs). Over and above that, out of the 33.5 million workers, 76 percent are rural workers. The shares of the annual gross value addition (GVA) of the rural and urban sectors are 15 percent and 85 percent respectively. What does this picture add up to? The analysis of the above fact reveals that even if 76 percent of the work force is rural people, still it just contributes 15 percent towards GVA, which shows the scope of increase in the productive capacity of the rural workforce of the services sector in India.
Having a huge hidden potential in all its distant, obscure villages in the fields of traditional arts and crafts, food industry and the like, the problem is that both the natural and population dividends are not being optimally harvested through proper skill enhancement and incentives. There are but a few programs for the training of such rural entrepreneurs to help them have the basic understanding of marketing, access to finances, their legal rights and obligations and the pros and cons of other related aspects.
Should the government focus on building entrepreneurship skill at an early age? Should they introduce an entire new curriculum to sow the seed from the school days to make them better understand the scope of it?
The government can more profitably focus on skill development of its existing population to reap the benefits of its demographic dividend and diverse natural and traditional resources that were medieval India's uniqueness in the world market. The Indian rural market with its vast size and demand base offers a huge opportunity for investment. Rural India has a large consuming class with 41 percent of India's middle-class and 58 percent of the total disposable income. Technological advances such as the internet and e-commerce will aid in better logistics and distribution in these areas. So, entrepreneurs by setting up new small and micro enterprises can leverage the rear large number of products and services in rural areas.